What is the opposite of a sunk cost? A “sunk gain”?

What is the opposite of sunk costs?

The opposite of a sunk cost is a prospective cost, which is a sum of money due depending on future business or economic decisions. For instance, a successful business may take on prospective costs only if its decision-makers decide to expand, such as by building a new plant.

What is the difference between a fixed cost and a sunk cost?

Sunk costs and fixed costs are two different types of costs. A sunk cost is always a fixed cost because it cannot be changed or altered. A fixed cost, however, is not a sunk cost, because it can be stopped, for example, in the sale or return of an asset.

What is shutdown and sunk cost?

Sunk costs are historical costs which have already been incurred. 2. Shut down costs are those costs which have to be incurred even if production or operation of an undertaking are discontinued temporarily due to strike or other reasons.

What’s another name for the sunk cost effect?

In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. Sunk costs are contrasted with prospective costs, which are future costs that may be avoided if action is taken.

What are sunk costs and opportunity costs?

Opportunity cost is what you give up when you choose between options. The key to minimize opportunity cost is by choosing the option that benefits the most. Sunk cost, on the other hand, is expense that is already gone. You have already paid for it and you can’t get it back.

What is meant by Incremental Cost?

Incremental cost is the total cost incurred due to an additional unit of product being produced. Incremental cost is calculated by analyzing the additional expenses involved in the production process, such as raw materials, for one additional unit of production.

What is another name for variable cost?

unit-level costs

Variable costs are sometimes called unit-level costs as they vary with the number of units produced.

What are some examples of opportunity cost?

A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).

Are sunk costs the same as marginal cost?

Sunk costs are costs that were paid. Since economic decisions are based on the marginal cost and the marginal benefit of a proposed action, the primary characteristic of sunk costs is that their marginal cost is zero, regardless of the initial cost.

Which cost is also known as past cost?

A past cost is money that has already been spent. These funds cannot be recovered, so the related cost is irrelevant for decision-making purposes. A past cost is also known as a sunk cost.

What is irrelevant cost?

Irrelevant costs are costs, either positive or negative, that would not be affected by a management decision. Irrelevant costs, such as fixed overhead and sunk costs, are therefore ignored when that decision is made.

What is a fixed cost fallacy?

The fixed cost fallacy occurs when a. A firm considers sunk costs in making decisions b. A firm ignores relevant costs c. A firm considers overhead or depreciation costs in making decisions d.

What are the types of cost?

Direct, indirect, fixed, and variable are the 4 main kinds of cost. In addition to this, you might also want to look into operating costs, opportunity costs, sunk costs, and controllable costs. We have described these 8 major accounting costs below for further clarification.

What is opportunity cost also known as?

Opportunity cost is commonly defined as the next best alternative. Also, known as the alternative cost, it is the loss of gain which could have been gained if another alternative was chosen. It can also be explained as the loss of benefit due to a change in choice.

What is meant by a fixed cost?

Fixed costs are costs that do not change when sales or production volumes increase or decrease. This is because they are not directly associated with manufacturing a product or delivering a service. As a result, fixed costs are considered to be indirect costs.

What is a mixed cost?

A semi-variable cost, also known as a semi-fixed cost or a mixed cost, is a cost composed of a mixture of both fixed and variable components. Costs are fixed for a set level of production or consumption, and become variable after this production level is exceeded.

What are implicit costs?

An implicit cost is a cost that exists without the exchange of cash and is not recorded for accounting purposes. Implicit costs represent the loss of income but do not represent a loss of profit.

What are 4 examples of fixed costs?

Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments.

What are the two different types of costs a company incurs?

Companies incur two types of production costs: variable and fixed costs. Variable costs change based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output.

Is rent a fixed cost?

Common examples of fixed costs include rental lease or mortgage payments, salaries, insurance payments, property taxes, interest expenses, depreciation, and some utilities.

Is electricity a fixed or variable cost?

variable cost

However, the cost of electricity is a variable cost since electricity usage increases with the number of products that are produced or manufactured. In short, if the total cost associated with the cost object changes when the production amount changes, it’s likely a variable cost.

Is a cell phone a fixed or variable expense?

Fixed Expenses

What Are Fixed Expenses? Fixed expenses are consistent and expected bills you pay each month, such as a mortgage or rent, a cellphone bill and a student loan payment. Car insurance, home insurance and life insurance are also fixed payments, along with your monthly electric and water bills.

Is salary a variable cost?

Annual salaries are fixed costs but other types of compensation, such as commissions or overtime, are variable costs.